Intrinsic Value of Fiat Currencies Under Siege by Gold

Earlier this evening, I was chatting up an ex-Morgan Stanley colleague who has been an independent professional advisor for futures and commodities trading over the past 10 years and is quite active in the gold and energy markets. I mentioned to him that I was doing a comparative correlation analysis of gold to some of the major G20 currencies and he had the following to say:

“It’s the intrinsic value of fiat currencies that is under siege. If we’re in a flotilla and all the boats are sinking does it really matter whose goes down first? At some point, that just becomes a footnote in history. Do I think we go away from the dollar altogether? No. But you do have to be looking at clients’ real WEALTH, not so much the nominal value of their accounts. How’d you like to have 10 million Hungarian pengõs right about now?…”

Warning: The Recession is Officially Over!

According to the Business Cycle Dating Committee of NBER, the recession which began in December 2007 has been declared officially over as of June 2009. Before one gets too giddy and the champagne corks start to fly, let us remember that while an end to a recession occurs when there is a trough in economic business activity, the ensuing expansion can take considerable time to develop.

SP-500 Market Condition: In Crisis Lies Opportunity

I preferred to wait until the official end of the quarter on Wednesday (6-30-2010) before updating my analysis. Yet, Tuesday’s market performance was so dramatic that I feel compelled to provide some preambulary comments to the quarterly report. With little time to spare this evening, let’s get at it…

1) Tuesday’s trading really flirted with disaster as the S&P 500 broke key support @ $1040 to reach a low of $1035.18, before regaining support at this level. Some market bulls may be encouraged by today’s close, but a deeper analysis reveals some disturbing signs.

Thoughts on Economy and Bear Market after Goldman’s 1Q 2009 Earnings Report

Last week, Wells Fargo surprised the market with positive earnings results that exceeded consensus estimates. Goldman Sachs, after the close of today’s trading (13-April-2009), has done no less as it also handily beat the consensus estimates.FASB changes in mark-to-market rules give traditional lenders like Wells Fargo a lot of latitude with assumptions for asset values. Goldman Sachs, on the other hand, is a reformed investment banker deprived of its lethal powers of leverage, but still has some of the best and smartest prop traders on the street. $7.15bn of the quarter’s $9.43bn revenues were derived from proprietary trading and investments. Shareholders entitled to receive their $0.35 per share dividend will make no qualms about this. To capitalize on its success, it also separately announced a $5bn common equity offering to raise capital which will likely be allocated to pay off TARP funding.

Thoughts on the Bear Market Rally…

In last Friday’s, Market Condition Summary report, I posted comments regarding whether this was a bull or bear market and the disturbing nature of a lagging economic indicator, i.e. Employment Situation report. I promised to post additional thoughts on this and after turning it over and poring over research databases and commentaries to glean additional insight, I have decided to keep it simple.

Warning to Fed: Allow Patient to Fully Recover Before Administering More Toxic Stimulants

Citigroup (C) announced plans to use $36.5bn of the $45bn in TARP funds it received for the purpose of lending in the following areas: $25bn in mortgages; $5.8bn for credit card loans; $2.5bn for consumer loans; $1.5bn for corporate loans; and $1bn for student loans.

CEO, Vikram Pandit, issued this statement: “Our responsibility is to put these funds to work quickly, prudently and transparently to increase available lending and liquidity.”

Fed’s “White Horse” Bailout of GMAC Enables Consumer Credit Habit & Stabilizes GM

The U.S. Treasury’s decision to inject $6bn worth of capital into GMAC allows the auto financer to broaden its distribution lending base to customers with minimum credit scores of 621 versus its previous standard of 700. This sounds counter-intuitive as cheap and easy credit is what precipitated today’s financial crisis. Then again, desperate times call for desparate measures.